Car Buying Part 2 – Into the Devil's domain.

Last time I covered the basics of going with a broker. I hope many of you found that advice useful. Now, I’m going to cover a few basics of buying a new or used car from a car dealership. (I’m into leasing because, well, I’ve never leased. It’s just never been the right option for me, so I couldn’t offer you great advice on something I’ve never done myself.)

Now I must point out that I really only am covering basics here. I could write a book about buying a car from a dealership, and many qualified professionals have already done so. That’s why I’d choose a broker over a dealership haggle. But, I didn’t have the broker option last time for one simple reason. My car died on me and I needed a new one asap. That’s when a broker falls down on doing it yourself. You can’t play the waiting game if you have no car to drive. So, once more into the Devil's domain I ventured. And here’s what advice I have to offer on that subject, in 10 simple steps.

1: Research, research, research.

I was lucky. When my old car kicked the bucket, I had already done my research. I knew I wanted a 2007 Civic Coupe, I knew the specs I wanted and the price I was going to pay. I was armed. I recommend you do the same. Do yourself a favor and go into a dealership with the car you have in mind bolted deeply in your head.

There are many ways to research a car. Use kbb.com and Edmunds.com . They are worth their weight in gold. Is an LX better than a DX, or is the extra cost not worth it? Do you need good fuel economy, rear wheel, front wheel or all wheel drive? What exactly do you need? Spend weeks on this, really. There is no such thing as a good impulse buy when it comes to a car.

2: What can you afford?

When you find the car you want, find out its TMV, also known as True Market Value. You can find more about that here at Edmunds.com

This is basically what people are paying for that car across the country, taking into account dealer incentives, seasonality and so on. This is a great place to start. On no account do you want to pay MORE than the TMV. Ideally, you’re going to use this as a figure to drive the price down from. I managed to get my car for well under the TMV, and that price was way, way under the sticker price on the car. What is Sticker? Well, that’s the pie-in-the-sky amount you see on the window that the dealer is hoping you’ll pay. And you will, if you’re known as a “laydown”. A good car salesman knows a laydown after just a few minutes (or sometimes less). A laydown will basically say all the wrong things, come armed with no research, reveal how much they want to pay immediately, reveal their trade-in and so on. DON’T be a lay down. So, bearing all that in mind, you now know what you want, and what you are willing to pay. Next, the trade-in.

3. Trading-in your old car

So, most of you will have a trade in. If you can, make sure this is paid off. You see those ads saying “I’ll pay off your trade no matter what you owe.” Of course he will. You can owe $28,000 on a car worth $35,000. He doesn’t care. All the dealer wants is your name on the dotted line. So, he’ll take in your car, pay off your trade and apply that huge figure to the balance of your new car. Guess what. Now that nice little car you had your eye on just doubled in price. Ouch. Even if you only owe a few thousand, get it paid off. It puts you in a much better place at the negotiating table. Now, you also need to get the fair value of this car. Kbb.com is a great resource. They have a tool for estimating the fair trade-in value of your car. And by fair, that means be honest. When you fill out the form, don’t say your car is in ‘excellent’ condition if it has a few dings and needs a new transmission. The dealer’s no fool. Get the real trade-in value, and write that down. Take NO LESS than that. And above all, never mention your trade-in until you’ve done the deal on the new car. Mentioning this first puts you in a position of weakness.

4: Financing ahead of time

If you can, get yourself pre-approved for a blank check auto loan. This gives you so much power at the closing table, I can’t tell you how cool this is. You’re not at the mercy of dealer offers, and best of all, you know exactly how much you’re approved for. Most financial institutions will do it, I used a Credit Union. They have excellent rates and you already know them if you use a bank you’re familiar with. Also, know what your credit score is. You can find this out for around $20, and it’s worth it. That lets you know what kind of APR you’re going to get if you do decide to go with a financing offer from the dealer. I’ve never paid more than 6.5% APR. Last time, it was 5.75%.

So, you’ve done the research, got the cash, know what you want and what you’re willing to pay. You even know the price of your trade, down to the last cent. You’re ready. (I’d say at this point, wait until the ideal time to buy a car – ideally, just before delivery of the new ’08 cars that are coming in this year. But, as most of us can’t wait for one specific month in the year, let’s move on)

5: The dealership, the sales staff, the horror.

I hate dealerships. I really do. It’s all a complete façade. You want to walk away with a car for peanuts, the dealer wants you to go bankrupt on a compact car with a rubber-band engine. But, this is where you can knuckle down and get the deal. First, walk into the dealership armed with your folder, filled with research and cold, hard facts and figures. That tells them straight-away that you are no laydown. Bingo. Stage one complete. Now, choose your vehicle. You know it. You’ve seen it before. Hopefully, you’ve even test-driven it a couple of times on previous occasions and walked away (good for you…this has the dealership dangling on a hook for your business). Now, you’re ready to say those immortal words “I think I’d like to buy this car.” At this point, you’ll get escorted to the ‘table’ and this is where battle commences. You’re going to hear things like ‘what can you afford as a monthly payment?” or “well, your trade-in isn’t quite up to scratch.” Here, I present you with the golden rule…

6: IF IN DOUBT, WALK OUT.

Seriously, this is a dealership’s Achilles heel. The second you mention that you’d like to think about it, and stand up, they freak. You’re almost a sale. You’re almost a big, fat, juicy commission check. There’s now way you’re leaving. And this is when the tables turn back to your favor. Be firm. Before they throw a whole bunch of mumbo jumbo handling fees and so forth at you, ask to see the INVOICE price of the new car. That’s the price they paid for the car, and by law they have to show it to you. Check as well. Make sure they’re not showing you an invoice for a souped-up version of the car you’re buying. If you’re buying a used car, you should already have the figure from your research at kbb.com. Either way, once you have that figure you know you’re not going to pay much more. Remember, don’t talk about a trade-in. Wait until you’ve agreed on a price, not based on a monthly payment but on a final, everything included final sale price. When that’s good and you feel good, then mention your trade. And you don’t say yes until you get what you want. You’re being reasonable, because the price you want is a good $2,000-$3,000 less than what the dealer will sell it for. That’s a nice profit. Add that to the small profit they’ll make from the car they sell you, and they’ve done quite nice for a few hours work.

7: The salesman, or woman, is not your friend.

A few times, I’ve had scenarios where a salesman has gone back and forth between myself and his boss, struggling on my behalf to get my payment down by a few thousand dollars. It’s bunk. Total bunk. He’s probably going in there to talk about the weather, or last night’s ball game, or what a sucker he has for a client right now. If you get the sense that you’re being taken for a fool, refer to part 6 of this guide. There is more wooden acting going on here than in a bad soap opera.

8: Deal’s done. Off to financing hell.

Yikes. Another table. Another set of papers. And yet more ways to get screwed. Only this time, you’re dealing with a person who is a phenomenal bean-counter. It’s the job of this person to add everything possible on to the sale of the car. Extra warranties, GAP insurance, clear bras, tinting, rust-proofing, alien-avoidance-radar, you name it, they’ve got something to sell. In my opinion, take nothing. All of these you can find yourself from great institutions at much less than what the dealer will charge. They mark these up by an enormous amount. You know what you want to pay, and with the unavoidable addition of dealer handling fees and sales tax, that’s all you will pay. If you have a blank check, sign it and hand it over. If not, you know your credit score so you know what kind of APR is coming to you. Feel good? Sign the papers. Don’t feel so good. See part 6. Walk away. You can come back another day, after you’ve had time to think it over. Until you sign, you are liable for nothing.

9: Check your vehicle.

Whether new or used, give your car a thorough going over before you leave the dealership. It’s amazing what shows up in daylight, after the car has been detailed. If you’re not happy with anything, make it known. The dealership will have to take care of it. Remember, this is a big purchase. Most likely the second largest after your home. So, just like a walkthrough before you move in, give your car that final once-over. Now, you’re ready to drive off home. It’s been a few hours, you’re a little older and a little greyer on top, but you did great. Now you can see why choosing a broker is preferable.

10: Relax.

Go home, put your feet up, grab a cocktail or a nice fat cup of tea and pat yourself on the back. You have walked into the devil’s domain and came out smelling of roses. Most people don’t. I know it took a long time to cover this, but it was worth it. And as I always say, IF IN DOUBT, WALK OUT. That’s your biggest bargaining chip. Happy motoring folks.

paul I liked your first car post so stuck around for the second. while I am not sure a broker is for me I think your current information applies to me. this information definitely helps. I will check back with you and let you know what kind of car I get.

Hey Cindy,
Thanks for sticking around for part 2. It took a lot longer to think through and prepare this article, but I think it was worth it. I don't want anyone out there feeling daunted by doing battle with a dealership. Please check back in and tell us how you got on. I'm sure you'll get a deal.

I meant "cars" of course. Not cards. Sorry. A bit of background, I'm four years out of college with an ok job (making about 50K) with no family. I want to get something that is not as boring as a Camry or Accord, but also don't want to get something completely impractical. Advice?

I bought my first car last year, and got a bunch of extras that I didn't need (warranty, Lo Jack), and what they kept giving me was the monthly payment info, which barely goes up as you add thousands of dollars to your final price. I was supposed to get away with an out-the-door price of $17K plus my trade-in, but I ended up with a loan for $21K. NEVER let them pull that whole "monthly payment" crap on you.

Also, I regret not selling my car on craigslist on my own. I would have had $5K in cash rather than a trade-in valued at just above $3K. It would have taken some extra work, but I could have done it.

Well, it's a mix of good and bad as a review goes. But keeping in mind that this person was a former car dealer, I can see why the animosity creeps in. As I would always add to my posts, this is subjective based on my own experiences and things I have learned. And for everyone who will tell you to mention your trade, I can find two who will say don't. I really don't care about ticking off the salesman, they never seemed to concerned about my well-being when they were trying to buy my trade-in for $1500 under book and sell me a car for $2000 over the TMV. So, like any review, I take it with a grain of salt. Still, nice to see we're getting some readership!

It is pretty cool to write a good enough article to not only inspire someone to respond, but to respond point by point! My own mother doesn't read my posts from beginning to end. I think she reads halfway and starts asking me whether I had dinner yet. And why do I look so thin? Have I lost weight? But I digress.

A glowing review is always preferable, but as my time in advertising has proven time and again, any reaction is good reaction. It does make me think about something though. The review quoted Wisebread as having those opinions, not me. I'd hate to think any of us, as bloggers, would tarnish the reputation of the whole site by writing something contentious. Is this something we need to address? That Wisebread is made up of individual thoughts and opinions, and may not necessarily reflect the views of the site as a whole?

I generally think that when something positive happens, I think of it as happening to "Wise Bread" the entity. When something bad happens, I would like to blame the writers individually. Preferably Andrea, but Chris is a good fall guy too.

In all seriousness, Wise Bread is a collection of great writing and opinions from individual writers. Not only is one writer's opinion not representative of the entire group, I would say many times we won't even find agreement among ourselves. Unfortunately the outside world will often lump us all together as "Wise Bread" because it is just easier for them to do so. We can gently correct them in serious cases of misidentification but I have a feeling that in everyday blogging it might not be that easy to police that type of lumping.

1. When I went into F&I, I didn't have a deal already in place. I was very specific on how many pulls I authorized (2) and that I wanted him to target creditors that pull TU. In the end, he did exactly as I asked. One was a bank I had a previous loan with, and the other being a local bank that I can may a payment in person at 3pm on a Saturday afternoon. Both were TU pulls as I requested.

2. There is one option I did purchase from him. The unemployment/disability payment coverage was a grand total of $1.48/mo for a $9000 purchase. Over 60 months (should I let the loan go it's full length) that is only $88.80. Having been unemployed and had a car loan in the past, this is peace of mind I didn't mind having.

Great advice, and I usually average the trade in value of kbb.com, edmunds.com, etc because kbb.com is the lower end. Then I add a few hundred to this price because they have to make a few dollars, and I make my offer. Always start low and smile. If you can, look in the owners manual of used cars and try to find the original owner. I've called them and you can ask them things like "did your teenage son ever drive this?". Or, did you pull a boat witht that minivan? The best one: why did you sell it?

Very interesting blog...there are some great points that you make on how to structure the deal.

You would be suprised how many people don't do any research before heading out to purchase a new or used vehicle. These are the majority, and it is one reason the dealership network continues to operate the way they do. It produces a larger gross profit in the end.

I read where someone mentioned doing the deal entirely by e-mail. That would be my recommendation...if you can find a dealership with an internet specialist that is good enough to be able to work with in that way. Eventually, you should be able to order the vehicle to YOUR specs from the manufacturer, similar to a direct buy from DELL computer.

Once a manufacturer figures this out...and they know that 90% of the consumers don't enjoy the process, someone will offer an easier way, and all dealerships will have to go this route. The buyer holds the cards, pays the cost, and will change the current way car dealers currently do business.